Getting into debt can be very easy but it is difficult to pay it off. In America, the average person owns eight credit cards and is $10,000 in debt. For many people, using credit cards is a way of survival due to a job loss or emergencies like medical expenses or repair bills. For others, it is simply a lack of control of overspending and not keeping track of how much they are spending. No matter what your reasons are for being in debt, you can find a way out of debt by making a few simple changes.
Cut Expenses and Plan a Budget:
For many people, the word budget sounds as bad as diet. But in truth, budgeting your money is a positive thing and will help you get out of debt. Look closely at your finances to determine exactly how much you need to live on each month in comparison to how much you earn. If you are spending more than you earn, look at expenses that could be eliminated. Extended cable TV, memberships, dining out, and going to movies are just some examples of money spent that could be eliminated. Little things like buying expensive coffee each day or eating lunch out can add up to big expenses for the month. If you are serious about paying down your debt, you will eliminate wasteful spending so you can actually live on your income each month without using a credit card.
Stop Using Your Credit Cards Today:
This sounds like a difficult step, but the sooner you stop using your credit cards, the less debt you will have to pay off. If you budget your money carefully and eliminated wasteful spending then you should be able to stop using the credit cards or at least narrow the use down to one. Take all but one credit card out of your wallet and lock them away so you don't use them. Then, make a pact with yourself to not use the credit card in your wallet for anything other than an extreme emergency.
Organize Your Credit Card Debt:
Take all of your credit card statements and place them in front of you. Look at the interest rate on each statement and place them in order of the highest interest rate to the lowest. Most specialty and department store credit cards charge the highest interest while national cards tend to charge less You will want to consolidate the balances of the highest interest rate cards onto the lowest interest rate card. Many national cards offer deals where you can consolidate your debt at a lower interest rate. If all of your cards are at a high interest rate, shop around for one that offers a lower rate. Place as much of your high interest balances on the lowest interest card as possible. Consolidate down to as few bills as possible so you be able to make the payments each month.
Pay Down High Interest Cards First:
When paying your bills, you should budget your money to make a larger payment each month on the highest interest card and make the minimum payment on the lower interest rate cards. Once one high interest card is paid off, begin placing more money on the next highest interest card. This is like a snowball effect. After each card is paid off, you will have more money to pay on the next card. Never skip payments on any of your debt consolidation credit card payments or it will negatively affect your credit score. It may take time, but eventually you will have your debt paid down and will no longer be wasting money on interest payments.
Save Money when the Debt is Paid Off:
Once you have your debt paid off, instead of spending the extra money at the end of the month (the money you were using to pay the debt), save it. Saving money will not only help you feel financially secure but will also help to keep you out of debt if an emergency does arise. You will have cash to pay for emergencies instead of using a credit card.
It takes time, patience, sacrifice and will-power to pay down large debts, so be proud of yourself for completing your goal. Living debt-free is a reward in itself and you will feel less stressed and happier.